You may be wondering about the changes to mortgage rules in Canada. How will this affect you? What’s changed? I’ve been a mortgage broker Edmonton for many years and I’ve helped hundred of clients with mortgage solutions they can count on. I’ve highlighted the changes below.
Regardless of how much they have for a down payment, homebuyers seeking an insured mortgage will be subject to a mortgage rate stress test as of Oct. 17th 2016. This stress test measures whether the buyer could still afford to make payments if mortgage rates rose to the Bank of Canada’s posted five-year fixed mortgage rate.
This rate is usually significantly higher than what typical banks or other lenders can offer. For instance, TD has a five-year fixed rate mortgage at 2.59 per cent, while the Bank of Canada’s rate is 4.64 per cent. The stress test also sets a ceiling of no more than 39 per cent of household income being necessary to cover home-carrying costs such as mortgage payments, heat and taxes.
Previously, buyers with more than a 20 per cent down payment opting for mortgage insurance have escaped such scrutiny. Being able to obtain low-ratio insurance sold through two private insurers, but backed by the federal government, subject to a 10 per cent deductible. Starting Nov. 30th 2016, new criteria for low-ratio insurance will take effect. To qualify, the mortgage’s amortization period must be 25 years or less, the purchase price be less than $1 million, the property be owner-occupied, and the buyer have a credit score of 600 or more.
These new rules also have major tax implications. Beginning this tax year, all home sales must be reported to the Canada Revenue Agency. The gains from sales of primary residences will remain tax-free, but the government is aiming to block foreign buyers from purchasing and flipping homes while falsely claiming the primary residence exemption from capital gains tax.
Despite the changes, whether you’re looking at buying a new home, investment property or refinance an existing property, you’re in good hands. Together we’ll review the best options and I’ll support you every step of the way through the application and closing process – it’s part of why I strive to be the best mortgage broker Edmonton.
Contact me today for more information!